The industry says the proposal is total overkill and needs to be both recalibrated and reduced. They, and Waller, also say that operational losses aren’t usually correlated with, say, credit risk events, so there’s not really a need to have another capital buffer for it.

“The charge for operational risk is extraordinary,” Bank Policy Institute CEO Greg Baer told reporters Tuesday. “It’s almost double the worst year of operational losses in history … and it assumes counterfactually and counterintuitively that op risk losses are perfectly correlated with market risk and credit risk losses, and therefore that you need to cover the worst case of all three simultaneously and capitalize for it.”

Karen Petrou, managing partner of Federal Financial Analytics, argues that banks’ money is better spent in other ways.

“What matters in terms of op risk in a cyber attack or a natural diaster, it’s not how much capital you have,” she told MM. “It’s whether or not you have redundant systems, backups, and appropriate controls. The amount of money you have stashed away in this punitive capital account will come in handy down the road for building new systems or paying litigation fines or handling angry customers. But the money would’ve been far better spent building resilient systems.”

Regulators’ response to these kinds of complaints about Basel is always the same: We’re listening.